The proceeds from the conversion of the Volkswagenwerk to a joint stock company at the beginning of the 1960s formed the starting capital of the Foundation; these were equivalent to a good 0.5 billion euros.
The capital of the Foundation meanwhile amounts to 2.9 billion euros and could thus be more than quintupled. The Foundation manages this capital on an autonomous basis.
The money expended on funding – some 150 million euros a year – derives from the investment of these assets; it also includes the countervalue of the profits from some 30.234.600 VW ordinary shares held by the State of Lower Saxony. In terms of the volume of funding granted, the Volkswagen Foundation is the biggest institution of this kind in Germany.
Investment Management Objectives
The Foundation is economically independent and thus autonomous in its decisions. Apart from financing the Foundation’s ongoing operations, the investments of the Foundation capital pursue above all two objectives: One is to secure funding for research on a continuous basis, while the second is to keep the real value of the Foundation capital intact.
The fact that the Foundation is oriented to sustained existence prohibits it from touching the Foundation capital to provide the means for funding. It is therefore exclusively the current income from the investment management that is used for this purpose. To ensure that such income maintains at least a constant figure in terms of its material counter-value, the assets of the Foundation must be protected against certain risks such as for example inflation-induced devaluation. This is achieved by forming reserves from a part of the annual proceeds – a measure permitted by law – as well as by generating growth in value.
Earnings-Oriented and Risk-Conscious
The investments of the Foundation’s assets are therefore based not only on interest-bearing securities, but also on stocks and real estate as well as alternative investments. It is these that additionally contribute to maintaining the real value of the assets through their ongoing growth.
The capital is invested in accordance with the principles of the portfolio theory: the more broadly the individual risks and thus also the chances are spread through the choice of the kind of investment, the better secured is the overall success. In this way, the Foundation exploits the risk diversification effect.
This investment strategy ensures the Foundation a successful asset management – not only earnings-oriented, but also risk-conscious – corresponding to the objectives of the Foundation as set forth in its Statutes.
At the end of the 1980s the Foundation set up an Investment Advisory Committee to advise the Foundation on its investment strategy as well as on evaluating the results achieved.